Rule change could lure record Saudi float

The City watchdog is considering a change to stock market rules that could pave the way for oil giant Saudi Aramco to choose London to hold the biggest share flotation in history.

Proposals by the Financial Conduct Authority would create a new category that exempts state-controlled companies from certain rules that apply to other “premium” firms.
They come as London vies with exchanges around the world to host the lucrative float of Aramco, which is said to be valued at more than $2tn (£1.55tn).
A listing in the City would be seen as a major victory for the City especially as it faces the threat of losing parts of its business to the continent thanks to Brexit.
Aramco is planning to list 5% of its shares and the FCA plan would allow state-controlled or “sovereign” firms to side-step rules that would otherwise oblige them to float at least a 25% stake to gain a premium status.
Without the rule change, it might have to take a “standard” listing seen as less attractive for investors and companies, with lower corporate governance requirements.

Image: The London Stock Exchange could host the float under the proposed rule changes
There has already been some opposition to the idea of bending the rules, with institutional investor Royal London Asset Management saying last month that special concessions for Aramco would be “highly inappropriate”.
The scale of the listing would mean the company automatically becoming a significant part of many passive investor funds – which track the biggest companies on the stock market.

There are concerns that such a small percentage placing could leave investors holding a stock that is relatively illiquid – that is, one that may be hard to sell.
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FCA chief executive Andrew Bailey said listing rules were important but should “remain well targeted”.
He said: “Refining the listing regime in this way would make UK markets more accessible whilst ensuring that the protections afforded by our premium listed regime are focused and appropriate.
“Sovereign owners are different from private sector individuals or companies – both in their motivations and their nature. Investors have long recognised this.”
The FCA has published a consultation on the proposals and aims to reveal its conclusions by the end of the year.